What Happens to Medicaid and SSI After a Workers’ Compensation Settlement?

A workers’ compensation settlement can affect your Medicaid and Supplemental Security Income (SSI) benefits in Connecticut. Because these programs have financial eligibility requirements, receiving a large settlement may cause your benefits to decrease or stop. However, planning before the settlement is paid may help protect your eligibility.

The good news is that estate planning options can help you make the most of your settlement while protecting your eligibility for SSI or Medicaid. Contact Disability Planning Partners to learn more.

How Does a Workers’ Compensation Settlement Affect SSI Benefits?

A workers’ compensation settlement can reduce or suspend SSI benefits because the Social Security Administration generally considers settlement proceeds when determining your income. This program has means-based limits, so earning too much can cost you.

With workers’ compensation, a settlement can create a distinct timing issue. Problems can arise when the SSA counts the settlement as income during the month you receive it, with any money you retain then counting as a resource beginning the following month.

The Social Security Administration may exclude certain expenses used to obtain the settlement when determining countable income. However, you should never assume that the amount remaining after attorney fees will automatically qualify for an exclusion.

Can You Lose Medicaid After Receiving a Workers’ Compensation Settlement?

The unfortunate reality is that a workers’ compensation settlement can affect your Medicaid eligibility. If the payment increases your income beyond the limits for your coverage category, you could lose your benefits. If you receive Medicaid because of a disability, your settlement’s impact on eligibility may differ from how it affects someone enrolled under another category.

Losing Medicaid can create serious problems if you depend on coverage. That’s why, before you receive a dollar of your settlement proceeds, it’s important to determine how your benefits might be impacted. Our attorneys can answer your questions about means testing and eligibility.

Can You Spend Down a Workers’ Compensation Settlement to Keep Benefits?

You may be able to use your settlement proceeds for legitimate expenses to reduce your countable resources, but spending money won’t always protect your SSI or Medicaid eligibility. For example, settlement funds may help pay medical expenses, but giving money to relatives or transferring assets for less than fair market value can create additional problems. SSI and Medicaid have rules concerning transfers, and the consequences depend on the particular program.

It’s also a good idea to distinguish between spending money and protecting it for your future needs. Spending down a settlement may restore your eligibility in some circumstances, but it can also leave you without the resources you need to live long term.

Does a Workers’ Compensation Settlement Affect SSDI Differently Than SSI?

SSDI doesn’t have the same asset limits as SSI. That means receiving a settlement won’t necessarily make you ineligible because you have too much money. However, workers’ compensation benefits can reduce your SSDI payments under federal offset rules.

The Social Security Administration generally considers whether your combined SSDI and workers’ compensation benefits exceed the applicable limit, commonly based on 80% of your average earnings before disability.

This isn’t limited to longer payouts, since a lump-sum settlement can still trigger this calculation. The Social Security Administration can then spread the settlement amount over time to determine the appropriate monthly offset.

What Should You Do Before Accepting a Workers’ Compensation Settlement?

Review how the proposed settlement will affect your existing benefits before signing the final agreement or receiving your first payment. Waiting until the money reaches your bank account can limit your estate planning options and lead to costly consequences.

First, identify every benefit you receive, including SSI, SSDI, Medicaid, Medicare, and any other needs-based programs. Next, determine how much money you’ll receive after accounting for attorney fees and expenses. The settlement agreement should also address any applicable medical-payment obligations.

You should also consider your future medical expenses. Workers’ compensation settlements may involve arrangements for future treatment, and Medicare interests may require separate attention.

Frequently Asked Questions

Will a workers’ compensation settlement automatically end SSI?

A settlement can affect SSI eligibility, but it won’t automatically end it. The outcome ultimately depends on the amount you received and whether or not your estate plan makes an appropriate arrangement for it.

Can you receive Medicaid and workers’ compensation benefits at the same time?

Yes, there’s nothing that inherently prevents you from receiving both at the same time.

Can you put a settlement into a special needs trust after receiving it?

Potentially, but timing matters. If you receive the money personally before transferring it into a trust, it may already have affected your SSI benefits.

Does a special needs trust let you spend money on anything?

No. The trustee has to follow the trust agreement and any benefit rules.

How Can Our Firm Help Protect Your Benefits After a Settlement?

A workers’ compensation settlement should provide financial support after a workplace injury, but receiving the money without a plan in place could cost you access to the benefits you rely on. Our firm can review your SSI and Medicaid eligibility and explain how your settlement might impact it.

We can also help you establish a trust in your name before you receive any settlement payments, which can help you plan for the future.

If you expect to receive a workers’ compensation settlement, Disability Planning Partners is here to help. Our attorneys will work with you to ensure your well-deserved settlement doesn’t cost you access to important Medicaid benefits. Contact us today to learn more.